Preferred Stock Investing-The Good , The Bad and The In Between 2021

[youbet]

The CG from the sale will not be UBTI??

 

[youbet]

Being dangerously uninformed about UBTI, I bought 2100 shares of SPLP-A in my Roth! Uh-oooooh! If 100% of the div is UBTI, I’m obviously going to be way over the kilobuck limit. Any clues as to how I can get an estimate of what percentage of the total 2021 divs will be UBTI? The info pb4uski provided (thanks) says the percentage can vary from very low to very high amongst various preferreds.

If I sell some/all of it, there will be a CG. I’m thinking that will not be UBTI, but not sure.

This is sure an interesting learning process.........

 

[pb4uski]

The CG from the sale will not be UBTI??

I don't think so in my case... since I will have held it less than 2 months and have not received any distributions I will not have received any return of capital distributions due to depreciation of other similar deductions claimed by the MLP that would be ordinary income and all my gain will be appreciation of the units since they were purchased and would be capital gain and not UBTI. In any event if thee is some leakage it will be less than the $1k hurdle.

Or at least that is my story and I'm sticking to it.

Does the sale of an MLP result in a capital gain or ordinary income for the shareholder?

Usually the sale results in both. Because the return of capital distributions are due to depreciation and other similar deductions claimed by the MLP, those deductions must be recaptured upon the sale – meaning that portion of the gain is taxed as ordinary income, not as a capital gain. Any appreciation in the value of the units since they were purchased would be taxed as a capital gain. However, this is a general rule; the exact amount of ordinary gain to realize upon a sale is calculated by the MLP at the time of the sale. ...

 

[Winemaker]

From my SPLA K1, line 19A, distributions $2787..........20V(UBTI)$155.

 

[youbet]

From my SPLA K1, line 19A, distributions $2787..........20V(UBTI)$155.

Thanks Winemaker!

With almost $3k of divs, UBTI was only $155. No tax complications for you. Excellent! How can we get a feel for 2021? Have you seen any history regarding this ratio in past years? Or Steel Partners comments regarding expectations?

 

[Winemaker]

I have owned this for a while and have never had an issue with UBTI. As far as the future, or announced projections, I have heard nothing.

 

[Mulligan]

Thanks Winemaker!



With almost $3k of divs, UBTI was only $155. No tax complications for you. Excellent! How can we get a feel for 2021? Have you seen any history regarding this ratio in past years? Or Steel Partners comments regarding expectations?

Youbet, most K-1 one preferreds generate very little UBTI. But I have heard over and over CEPQ- generates a ton. Most of it is UBTI from everything I read.
I guess it nots the end of the world to go over $1000. But your tax rate will be alot higher and I hear many brokerages charge up to $300 for that processing fee.

 

[bobandsherry]

Youbet, most K-1 one preferreds generate very little UBTI. But I have heard over and over CEPQ- generates a ton. Most of it is UBTI from everything I read.
I guess it nots the end of the world to go over $1000. But your tax rate will be alot higher and I hear many brokerages charge up to $300 for that processing fee.

I have a small position in CEPQ- (not in IRA), for last year 100% of K-1 Line 1 was reported on Line-20/V, which I understand to be the UBTI.

 

[Mulligan]

I have a small position in CEPQ- (not in IRA), for last year 100% of K-1 Line 1 was reported on Line-20/V, which I understand to be the UBTI.

Bob, You are confirming my memory which I dont trust, lol...I thought it was around 100%... Did you K-1 file on TurboTax yourself?

 

[bobandsherry]

Bob, You are confirming my memory which I dont trust, lol...I thought it was around 100%... Did you K-1 file on TurboTax yourself?

I do my own taxes but use the H&R Block tax program.

 

[pb4uski]

Another one bites the dust: SCHW-C
From Vanguard:

SCHWAB CHARLES CORP NEW DEP SHS REPSTG 1/40TH NON CUML PERP PFD C 6%, 808513402, in the brokerage account xxxxxxxx, is scheduled to be redeemed on 2021-06-01. A quantity of yyy will be redeemed at $25

 

[pb4uski]

...I also like issues like SESCF which is past call and a 2027 mandatory maturity senior note from Seaspan. It traded today at $25.10 and recently went exD. So you arent exposed to a call loss here even if it gets redeemed soon. Its a 7.375% coupon. Seaspan has BBB- senior secured credit rating which is good for a shipper. So this would slot BB ish debt. Milk the cow until its called and move on if it happens.

Hey Mulligan,

I did some research on SESCF and did end up buying some. Then today I got this on a voluntary exchange opportunity to get swap SESCF for similar notes issued by their parent company Atlas... response deadline is 4:30pm on May 3:

Atlas Corp. is offering to exchange up to $80 million principal amount of Seaspan Corp.7.125% notes due 2027 for an equivalent principal amount of new Atlas Corp. 7.125% notes due 2027 (ATCO Notes).

The ATCO notes will be substantially similar to the Seaspan notes except for the following:
-The ATCO notes will be the obligations of Atlas, the parent entity of Seaspan
-After the 2nd anniversary of their date of issuance, the ATCO notes will be redeemable at 100% of principal
-The ATCO notes are expected to be listed on the Nasdaq Bond Exchange
-The ATCO notes terms will exclude covenants that govern the primary business activities of Atlas and require certain reporting in the event of cross default

Notes will be exchanged in minimum denominations of $25 and in multiples of $25 thereafter.

For the complete terms of the offer, please see the Prospectus (Form 424B3) filed April 7, 2021.
https://ir.atlascorporation.com/sec-filings

Note:
If you exchange your notes through this offer, your notes will not be available to sell or transfer. Any withdrawal requests will be handled on a best efforts basis up until the response deadline. It generally takes 2-3 weeks from the offer deadline for Vanguard to credit the proceeds to your account.

What do you think? I'm wondering if the Atlas notes might be less subject to be called... otherwise why would they bother with the voluntary exchange. Guess I'll need to read the prosectus.

 

[tizod]

stay with SSW

It seems tehy are doing these to TRY to allow some to call early. I did not see the benefit to change.

 

[pb4uski]

What is SSW?

 

[Winemaker]

^^ Old symbol for Seaspan.

 

[Mulligan]

Hey Mulligan,



I did some research on SESCF and did end up buying some. Then today I got this on a voluntary exchange opportunity to get swap SESCF for similar notes issued by their parent company Atlas... response deadline is 4:30pm on May 3:







What do you think? I'm wondering if the Atlas notes might be less subject to be called... otherwise why would they bother with the voluntary exchange. Guess I'll need to read the prosectus.

PB, This is my third biggest hold behind FPI-B and WTREP. I got back in at $24. They can pound sand and suck it I aint tendering. SESCF is senior debt and they are trying to exchange you into subordinated holding company debt. Holding company debt is lower stack than subsidiary debt. In fact it would be below Seaspan preferreds if they were ever reissued (they got moved to the hold co, ATCO).
Yes you are getting 2 years protection, but Im betting they are bluffing. If not so be it...But SESCF is also tradeable on OTC. They are going to give you $25 baby bonds of ATCO that are going to the Nasdaq bond market...WTF is that? They will not be tradeable. You would have to call bond desk to sell them and then get screwed over by the bond desk thieves.
If you really want the 2 year protection and have no intent or reason to ever sell, it may be worth it. For me its not, and I will keep my SESCF and dare them to do something, or give a better next offer.

 

[pb4uski]

Convinced me to do nothing and just hold onto SESCF. I didn't get in at $24 like you did but I'm not concerned about a call.

 

[brokrken]

Speaking of Seaspan. I have ATCO-G (old SSW-G). It is callable on 6/16/21 at par and currently trading at $26. It goes ex next Wednesday, so let's assume that ~$0.51 of that price is the built in divy. If it is to be called, I'd also pick up another 45 days of accrued interest, so another ~$0.25. So, assuming it is going to be called, selling now I pick up $0.24. Typically I wouldn't bother and would just take the call risk since it is so small, but with the discussions above, I wonder if I should take the free $0.24. Thoughts?

 

[Texas Proud]

Speaking of Seaspan. I have ATCO-G (old SSW-G). It is callable on 6/16/21 at par and currently trading at $26. It goes ex next Wednesday, so let's assume that ~$0.51 of that price is the built in divy. If it is to be called, I'd also pick up another 45 days of accrued interest, so another ~$0.25. So, assuming it is going to be called, selling now I pick up $0.24. Typically I wouldn't bother and would just take the call risk since it is so small, but with the discussions above, I wonder if I should take the free $0.24. Thoughts?

My quick calc says it is 8% yield.... I would take the risk of call to keep an 8% yield...

 

[Mulligan]

My quick calc says it is 8% yield.... I would take the risk of call to keep an 8% yield...

Texas, I agree, this is hold co preferred now that Seaspan is subsidiary. They are trying to take on Seaspan debt at 7.375% so 8% lower cap hold co preferred sounds like reasonable risk to take to keep the yield if you are so inclined.

 

[brokrken]

Texas and Mully, great points. Thanks for the input. I'll hold

 

[BrianB]

Realty Income & Vereit merging, what will happen to Vereit Preferred?

It was just announced that Realty Income & Vereit will merge:

https://www.realtyincome.com/investors/press-releases/press-release-details/2021/Realty-Income-To-Merge-With-VEREIT-In-All-Stock-Transaction/default.aspx

I own some Realty Income, and some Vereit preferred (not common). I hold both for the income. Vereit has been doing partial redemptions of the preferred so will this be the end of the issue? The only mention of VERPRF that I could find was in an article that Quicken linked to:

VEREIT has approximately $373 million of outstanding preferred equity at a rate of 6.7%, which is freely prepayable at par.

Any thoughts from you more experienced & knowledgeable preferred traders out there? It's selling at $25.47 (about 4 months of dividends over par) now, I may just take the money but finding any comparable yield isn't easy.

BrianB

 

[Mulligan]

It was just announced that Realty Income & Vereit will merge:

https://www.realtyincome.com/invest...-VEREIT-In-All-Stock-Transaction/default.aspx

I own some Realty Income, and some Vereit preferred (not common). I hold both for the income. Vereit has been doing partial redemptions of the preferred so will this be the end of the issue? The only mention of VERPRF that I could find was in an article that Quicken linked to:



Any thoughts from you more experienced & knowledgeable preferred traders out there? It's selling at $25.47 (about 4 months of dividends over par) now, I may just take the money but finding any comparable yield isn't easy.

BrianB

Brian, my guess is VER will now leave the preferred alone until merger is complete. And O will have this redeemed pronto after that. It becomes a guess on how long it will take to get the acquisition consummated. I doubt much meat is left on the bone at that price. I personally would do what you are thinking of doing.
I have been chasing a ghost for years off and on and finally snagged it today... BACRP. Its an old delisted Bank of America 7% $100 par preferred. Its cumulative, Baa3, and nonredeemable by company. But it can be redeemed by holder (me) anytime at $100 if one ever desired. I dont know of a preferred like that left in preferred land. I snagged 100 at $105 today.
The last 100 share trade prior to mine was 2009. How crazy is that?

 

[Graust]

Mully,

Do you just leave trades like BARCP as a GTC? Or do you set alerts and then pounce on them? Just curious....thanks for digging up these obscure issues!

EDIT: You want to see those 100 to me for $117? Haha

 

[Mulligan]

Mully,

Do you just leave trades like BARCP as a GTC? Or do you set alerts and then pounce on them? Just curious....thanks for digging up these obscure issues!

EDIT: You want to see those 100 to me for $117? Haha

Graust, It was probably just luck...See I have seen this BACRP on OTC for many years. But it didnt “seem right”. Why would BoA have a delisted preferred? And it wasnt on Quantum, and I actually seen a few small 10 share type blip trades over the years at like $8 and $20 which made zero sense. And nobody rarely had a bid over $20 for a $7 annual payment.
But I finally figured out through research it was the The Series B preferred. And BoA has it on their website. And then I dug into annual filings and found it out to be uncallable and issued in the early 1980s. BoA shows 7,000 shares exist out of an original 35,000 share float. But BoA could own a lot of those 7,000 shares and not cancelled them. I would suspect it wouldnt take 12 years for a 100 shares to ever transact if there werent less than a 7k tradeable float.
Considering its uncallable and 7%, it really should be trading around $150 if it had a true tradeable float. But I have never seen an ask price quoted on it.
Even when I snagged mine there was no ask price showing. I got interested about a month ago. And noticed that 10 shares a couple times sold a fraction of penny above me. I was the only one bidding. Pissed me off. So after a week again, I said WTF I will put out a $105 bid. And about 30 minutes later I saw it hit. I couldnt believe it to be honest with you.